Santander ups stakes in current account war
Saturday 10 September 2011
Banks and building societies are locked in a continuous battle to attract new business via a range of savings and lending products, but the Holy Grail as far as customer acquisition goes has always been the current account.
Providers utilise vast advertising budgets to highlight the benefits of their bank account and why it is a better option compared with similar accounts offered by their competitors.
However, the biggest hurdle as far as the banks are concerned is that customers are reluctant to change banks. Some people feel that all banks are much the same, whereas others are concerned that the transfer process is fraught with danger and so they stay put, even though their existing account may not be right for the way they run their finances.
It has become increasingly common to offer financial sweeteners to tempt customers to switch their current account, with up to £100 on the table from some banks.
This week the Spanish giant Santander is throwing down the gauntlet to its rivals by offering up to £300 to customers who transfer their current account.
The £300 bounty is available to existing Santander mortgage customers who deposit at least £10,000 in a Santander savings account and also transfer their current account. For its mortgage customers that switch their current account to Santander but not their savings, the cash incentive is still a very tempting £200.
There is no doubt that Santander offers a range competitive current account and savings products. At the same time, however, it has had a reputation for below average customer service, something that it says it has been working hard to improve.
The latest FSA complaints data highlights that the extra customer service focus is beginning to pay off.
The bank is moving in the right direction with banking complaints down 36 per cent in the first half of 2011 when compared with the same period last year.
There is no doubt that these new promotional cash incentives are generous and I am sure will generate new business but the service improvement initiatives must remain Santander's number-one objective if it wants to build long and rewarding relationships with its current account customers.
Credit card offers, thick and fast
Only last week I mentioned how we were seeing the credit card market industry focussing its efforts on two distinct fronts, namely the long-term 0 per cent balance transfer market and credit card cashback or rewards.
This week we've seen further new examples of each.
First Direct has joined the frenzy in the balance transfer war with a new 20 month interest free promotion. The deal falls just short of the best buy offers of 22 months from Halifax and Barclaycard and is only available to existing or new First Direct current account customers.
Sainsbury's Finance, on the other hand, has launched a good all-round card with a particular focus on rewarding regular Sainsbury's shoppers. The latest Sainsbury's Nectar credit card at 16.9 per cent APR comes with 0 per cent on balance transfers for a credible 15 months, but for those without a balance to switch, it offers 6 months interest free on purchases and a reward rate equivalent to 2 per cent when used in store, online or at Sainsbury's filling stations.
An ISA isn't just for April
Just because the buzz surrounding ISAs has calmed now that we are five months into the tax year, it is still worth checking the rate you are getting on your existing tax-free savings.
Some old accounts that may have been best buys at the time are now paying rates as low as 0.1 per cent, but with accounts paying up to 3.75 per cent available for 2 years and 3.25 per cent for 1 year it is worth reviewing your options.
If you have £5000 in an ISA paying 0.1 per cent you'll get an annual return of just £5, but switch it to an account at 3.25 per cent and becomes a far more respectable £162.50 per year.
Like many people it is likely that you're not sure what rate you're getting, so give your bank a quick call or pop in to find out – don't let it boost its profits at your expense.
Amongst the best fixed-rate ISAs currently available, take a look at Post Office where you can get 3.25 per cent for one year or 3.75 per cent for two years. Both permit the transfer in of previous years' balances. If you are happy to consider a longer term, Halifax is paying 4.3 per cent for a four year fix or you can get 4.5 per cent for five years from Yorkshire Bank and Clydesdale Bank.
Save Our Savers, the independent action group, has launched an e-petition calling on the Government to suspend income tax on savings interest. It would be nice if it came off, but I think it is highly unlikely. So if it's tax free savings you're after, make the most of your annual ISA allowance.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
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